GAO chief lauds outsourcing report, but union vows to fight it

By Jason Peckenpaugh

May 1, 2002

Comptroller General David Walker defended the final report of a panel studying federal outsourcing policy on Tuesday while federal employee unions vowed to fight a new public-private competition process recommended by the panel.

The 134-page report is the product of the Commercial Activities Panel, a 12-member group including members from the Defense Department, the Office of Management and Budget, private industry, federal unions and academia. Chartered by Congress, the panel had a broad mandate to study federal outsourcing issues but narrowed its focus to the public-private job competition process governed by OMB Circular A-76.

By an 8-4 vote, the panel urged OMB to replace the A-76 process with a new method based on the procurement rules of the Federal Acquisition Regulation. Specifically, the process would follow Part 15 of the FAR, which says how to conduct procurements under the "best value" approach, a method that allows non-cost factors such as technical performance and reputation to be considered in procurement decisions. Cost can still be the dominant factor under FAR Part 15, as well.

The report says the FAR is now a better template for competing federal jobs than the A-76 process, which was written at a time when most federal contracts were awarded by low bid.

"The most serious shortcoming of the A-76 process is that it has been stretched beyond its original purpose, which was to determine the low-cost provider of a defined set of services," said the report. "Circular A-76 has not worked well as the basis for competitions that seek to identify the best provider in terms of quality, innovation, flexibility and reliability."

Panel chairman David Walker added the FAR would be easier to use than A-76. "It's something that a lot of people in the federal government are capable of dealing with," he said, noting that some elements of the current A-76 process should be added to the FAR-based method.

But federal unions and some experts believe the FAR-based method puts federal employees at a disadvantage. At the very least, in-house employees will no longer be able to keep their jobs by simply underbidding the competition, said Steven Sorett, a lawyer with Reed Smith LLP. "It means when they are putting together an [in-house team], you can't rely on a low bid strategy as being the winning strategy," he said. "It's going to really pose some new challenges to the [in-house team]."

The panel report also makes no mention of a long-running Defense Department effort to make "best value" competitions easier to conduct within the existing A-76 process. Over the past four years, 55 out of 314 A-76 competitions conducted by Defense have been held under the best value standard, according to Annie Andrews, assistant director of the Defense Department's competitive sourcing office. The Pentagon has been fine-tuning guidance that would clarify the rules for best-value competitions and still plans to issue this document, according to Andrews.

Defense cannot use the FAR-based best value method until Congress repeals a statute that prohibits it, one of the few areas where Congress must act to implement a panel recommendation. The American Federation of Government Employees will oppose any effort to rollback the statute (Section 2462 of Title 10), said Bobby Harnage, president of the union. "Now the real fight begins on the Hill," he said.

Congressional action will also be necessary to grant federal employees the right to appeal FAR-based competitions to the General Accounting Office--another panel recommendation, according to Walker. "It is our recommendation that . . . everybody would compete at once but that because of that employee organizations would have an opportunity to appeal to GAO," he said.

OMB has not decided if it will introduce legislation granting formal appeal rights to in-house employees, but does support giving in-house teams such rights, said Angela Styles, administrator of the Office of Federal Procurement Policy. Walker will testify in support of the FAR-based competition process at a May 24 hearing of the Subcommittee on Technology and Procurement Policy of the House Government Reform Committee, he said.

Some observers were disappointed that the panel did not spend more time studying broader contracting issues, such as the rules that govern what federal jobs are eligible for outsourcing. "The hope is that with this process issue now out of the way we can get to the big picture," said Dan Guttman, a fellow with the National Academy of Public Administration. "The [panel report] looks more like an interest group battle than a discussion of issues of great public consequence."

But most panel members weren't interested in studying the definition of "inherently governmental" work, which by law is off-limits to outsourcing, according to Walker. "That was not something that people felt we needed to spend a lot of time on," he said.